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MUMBAI: Entertainment exhibition companies such as PVR and Inox might have to endure business loss for a protracted period, perhaps several months, until theatres open. But what’s even more important for their financial health is audience comfort with public gatherings.

Adding to their woes, now production houses have started releasing films directly on an OTT (over–the–top media services) platform by skipping the theatrical window run.

PVR stock declined 4.3% to Rs 851 on Friday while Inox Leisure fell 4% to Rs 194. The share prices of both stocks have corrected by 60% since February 19.

“If a higher number of producers prefer to release movies directly on OTT platforms in the view of extended lockdown, it could disrupt the audience consumption behaviour, which in-turn negatively impacts footfalls at multiplexes after Covid-19,” said Sanjeev Hota, head of research, Sharekhan. “With limited cash-inflows in the wake of the lockdown, multiplexes are expected to defer their capex program to FY22”.

Inox Leisure on Thursday expressed its "extreme displeasure and disappointment" over films being released directly on the online-streaming platforms.

Multiplexes were the first to shut in the wake of the nationwide lockdowns and are expected to be the last to resume.

“Fixed costs are burning their pockets and new OTT platforms continue to be a risk going ahead for the business,” said Vikas Jain, senior research analyst, Reliance Securities. “Investors should still wait for allocation as visibility of revenues is bleak as social distancing rules will hit their capacities and operating costs will continue to accrue.”

Extended lockdown restrictions will impact the performance of multiplexes during first half of FY2021, said analysts after reducing their earnings estimates drastically.

While Inox is virtually a debt free company, PVR’s liquidity is expected to be supported by healthy cash balances of Rs 300 crore compared to its gross debt of Rs 1,300 crore. Absolute repayment obligations for PVR are Rs 425 crore over the next two fiscals.

Multiplexes, under the umbrella of Multiplex Association of India, have sought government support in the form of salary subsidies, interest free loans for three years, tax exemptions, waiver on electricity charges for a year and auto renewal of licenses and permits.

“I am extremely bearish on these stocks. The idea of entertainment has changed with the advent of OTT and the Covid outbreak is likely to further change the way we consume entertainment” said Sanjiv Bhasin, director, IIFL Securities. “Even after Covid19 is over some habits may have been formed and people may not quickly go to theatres”.